Crystallex/Citgo Update – Is the Process Drawing to a Close?

The First Tuesday Update (FTU) is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement.

A case of current, significant interest in our space is Crystallex International Corporation v. Bolivarian Republic of Venezuela, No. 17-mc-151, D. Del. (Crystallex), in which we are involved and which has been the subject of prior FTUs. Crystallex is the Delaware case involving the potential sale of the stock of Citgo, an indirectly owned asset of Venezuela, to satisfy creditors of Venezuela and PDVSA. The case has been very active—in the time since our last update on March 5, 2024, there have been over 500 docket entries. Most notably, the case has continued to progress to a court-supervised sale of Citgo, with a stalking horse bid recently received. We provide a high-level overview, and a month-by-month summary, below.

When we last discussed Crystallex, the biggest open question was the validity of the PDVSA 2020 bonds and how these creditors would be dealt with in a sale of Citgo. Although the validity issue has still not yet been resolved (the parties re-briefed summary judgment in Petróleos de Venezuela S.A. et al. v. MUFG Union Bank, N.A. et al., No. 19-cv-10023, S.D.N.Y., including several expert opinions on the proper interpretation of Venezuelan law, and response briefs were filed on March 18, 2025), recent developments in Crystallex show that the PDVSA 2020 bonds were factored into recent bids for Citgo. Most notably, in March 2025, the Special Master recommended a $3.7 billion stalking horse bid from Red Tree over a $7.1 billion bid from Gold Reserve because Red Tree had reached a prospective settlement with the PDVSA 2020 bondholders, and the Special Master determined that the certainty of closing was therefore higher for Red Tree than for Gold Reserve. The other two stalking horse bids were for $3.422 billion in cash from "Bidder B", and $3.5 billion ($1.85 billion in cash, $1.65 billion in non-cash consideration) from "Bidder C". The Topping Period¹has now begun, and the sale hearing is currently scheduled for July 22, 23, and 24, 2025. (In September 2024, the Special Master recommended a bid from Amber Energy (an affiliate of Elliott) for approximately $7.3 billion, but the bid was universally criticized by the Attached Judgment Creditors, and Amber subsequently withdrew their bid.) 

March 2024:

Each of the Attached Judgment Creditors delivered their writs of attachment to the United States Marshal in priority order. The US Marshal then served the writs of attachment on the Special Master, who has custody of the property (i.e., the share certificates for PDVSA’s ownership of PDVH).

The Attached Judgment Creditors are as follows, listed in priority order:

1. Crystallex Corporation
2. Tidewater Caribe S.A. and Tidewater Investment SRL
3. Phillips Petroleum Company Venezuela Limited and ConocoPhillips Petrozuata B.V. (Petrozuata/Hamaca judgment)
4. OI European Group B.V. and Huntington Ingalls Incorporated (tied with OI European Group and will recover pro rata) 
5. ACL1 Investments Ltd., ACL2 Investments Ltd., LDO (Cayman) XVIII Ltd.
6. Red Tree Investments, LLC (19-cv-2519, S.D.N.Y.); Red Tree Investments, LLC (19-cv-2523, S.D.N.Y.); and Red Tree Investments, LLC (fee judgment)
7. Rusoro Mining Limited
8. ConocoPhillips Gulf of Paria B.V. (Corocoro judgment)
9. Koch Minerals Sarls and Koch Nitrogen International
10. Gold Reserve Inc.
11. Siemens Energy Inc.
12. Consorcio Andino, S.L., Valores Mundiales, S.L.
13. Contrarian Capital Management, LLC (October 2020 judgment); Contrarian Capital Management, LLC (May 2021 judgment); and Contrarian Capital Management, LLC (October 2021 judgment)
14. ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V., and ConocoPhillips Gulf of Paria B.V. (ICSID judgment)
15. Pharo Gaia Fund Ltd., Pharo Macro Fund Ltd., and Pharo Trading Fund, Ltd. (20-cv-8497, S.D.N.Y.); and Pharo Gaia Fund Ltd., Pharo Macro Fund Ltd., and Pharo Trading Fund, Ltd. (19-cv-3123, S.D.N.Y.)
16. Gramercy Distressed Opportunity Fund LLC (18-1371, D.D.C.); and Gramercy Distressed Opportunity Fund LLC (18-1373, D.D.C.)
17. Saint-Gobain Performance Plastics Europe
18. Altana Credit Opportunities Fund SPC, Altana Credit Opportunities Fund 1 SP, and Altana Funds LTD. Cayman

April 2024:

The Crystallex court entered a final determination of the Attached Judgments. Venezuela moved to disqualify the Special Master, and objected to the Special Master’s modification of bidding procedures, specifically the requirement that bidders provide details regarding how they planned to address the PDVSA 2020 bondholders’ claim.

May 2024:

The Crystallex court held a May 17, 2024 hearing and overruled Venezuela’s objections to the bidding procedure modification. Later that month, the motion to disqualify the Special Master was denied.

June 2024:

The first round of bidding closed. Two PDVSA creditors, who were not Attached Judgment Creditors, filed lawsuits in the Southern District of New York seeking to pierce the veil from PDVSA to PDVH to enforce their judgments.

July 2024:

On July 2, 2024, the Crystallex court held a hearing, at which point it became clear that the tentative sale hearing scheduled for July 15, 2024 could not go forward as scheduled. It was then rescheduled for September. One Attached Judgment Creditor filed a lawsuit in the Southern District of Texas seeking to pierce the veil from PDVSA to PDVH to enforce its judgment.

August 2024:

The Special Master was still not ready to file a notice of final recommendation. Thus, in the beginning of August, the sale hearing was rescheduled for October. At the end of August, it was rescheduled again, this time for November.

September 2024:

The Special Master filed a "Motion to Enjoin the Alter Ego Claimants from Enforcing Claims Against the Republic or PDVSA by Collecting from PDVH or its Subsidiaries in Other Forums." Expedited briefing on the injunction motion, which sought to enjoin the two SDNY cases and the case in the Southern District of Texas, took place in September. During the same period, expedited briefing also took place on Venezuela’s renewed motion for a stay, as well as on Citgo Holding and PDVH’s objections to the Special Master's conduct regarding the Stock Purchase Agreement, which were subsequently overruled. On September 27, 2024, the Special Master recommended that Amber Energy Inc., an affiliate of Elliott Investment Management L.P., be selected as the Successful Bidder. Amber Energy proposed a purchase price of $7.286 billion, subject to two escrow accounts (one for the PDVSA 2020 bondholder claims, and one for alter ego claims), and to the condition that, if the court denied the Special Master's motion to enjoin the alter ego claims, Amber Energy could terminate the purchase.

October 2024:

On October 1, 2024, the Crystallex court held a hearing in Washington, DC on the injunction motion, the motion to stay, and the recommendation of Amber Energy. The Attached Judgment Creditors were unsatisfied with the Amber Energy bid for a variety of reasons, especially because it was uncertain how much cash the Attached Judgment Creditors would actually receive from the transaction. The remaining October briefing largely followed up on questions the court had raised during the hearing regarding the injunction and the Amber Energy bid. Later in the month, an Attached Judgment Creditor filed a fourth lawsuit in Texas state court seeking to pierce the veil from PDVSA to PDVH to enforce its judgment, and in mid-October, ConocoPhillips filed a complaint in the District of Delaware for declaratory judgment that the alter ego claimants were not entitled to their requested relief.

November 2024:

In early November, the Special Master filed a notice of an "alternative transaction" bid from Amber, which removed the condition requiring the court to grant the injunction motion before the deal could close and lowered the bid price by $2 billion. The Crystallex court then issued an "order and inclinations" on November 20, 2024. This order covered many topics, including: 1) ordering the Special Master to file an unredacted Stock Purchase Agreement so the public, and all parties, could see all of the terms; and 2) ordering a briefing schedule for the parties to respond to the court's inclinations to (a) deny the injunction motion, (b) establish universal bidder protections, and (c) set a schedule whereby the Special Master identifies the best-available bid, then after a topping period, identifies the best-available bid again, and only then do the parties object to the recommendation. The court also set a schedule for briefing on material terms and the framework for evaluating the best-available bid before the Special Master makes a recommendation.

December 2024:

The parties briefed their responses to the court's inclinations in the first few weeks of December, and the Crystallex court heard the parties at a December 13, 2024 hearing. One topic discussed at the hearing was the Special Master’s bills. The Sale Procedures Order provides that each Attached Judgment Creditor is responsible for paying a portion of the bills (after an opportunity to object), although when the sale closes, the parties will be reimbursed for their shares of the Special Master'’s expenses before any creditor's judgment is satisfied. The September bill was $4.1 million, and for the first time in the proceedings, the Attached Judgment Creditors objected. The crux of their complaint was that the reason the Amber Energy bid had failed was the Special Master's flawed process, and they shouldn't have to pay for wasted effort.

At the end of the month, the Crystallex court issued a memorandum opinion denying the injunction motion, an order setting for new procedures for the Special Master's bills, and an order on the sale process.

Pursuant to the December 31, 2024 order on the sale process: 1) the Special Master was ordered to conduct an additional marketing period; 2) the data room was reopened; 3) the parties were ordered to discuss and brief proposed bidder protections and material terms of a Stock Purchase Agreement such that the court could rule by the end of January 2025; 4) the Special Master was ordered to draft proposed amendments to the Sale Procedures Order if necessary, and; 5) the Special Master was ordered to solicit bids for a Stalking Horse. The order then provided dates for objections to the Stalking Horse recommendation, a topping period, a final recommendation, a discovery period, and a sale hearing on July 22, 23, and 24, 2025. The court clarified that there should be no requirement or condition for bidders with respect to the PDVSA 2020 bonds "other than that bidders acknowledge that the 2020 Bond Entities purport to have a pledge of 50.1% of the equity of CITGO Holding, Inc., which is disputed by the Venezuela Parties and is subject to active litigation.”

January and February 2025:

Extensive briefing on the details of the bidder protections, material terms, and more (over 60 documents were filed in those two months) was resolved in a series of brief orders in late February and early March 2025. ConocoPhillips voluntarily dismissed its Delaware declaratory judgment action. 

March 2025:

The Special Master obtained several extensions to file his recommendation, and on March 21, 2025, he recommended Red Tree (an indirect subsidiary of Contrarian) as the Stalking Horse. There were four proposed Stalking Horse bids. The highest bid, for $7.081 billion, came from a consortium including Gold Reserve/Rusoro/Koch, but the Special Master selected the second-highest bid, for $3.699 billion in cash and $458 million in non-cash consideration from Red Tree because he determined that it had a higher certainty of closing since Red Tree had reached a prospective settlement with the holders of the PDVSA 2020 bonds. The Red Tree proposal would fully satisfy all creditors through priority position #6. "Bidder B" bid $3.422 billion in cash, which would satisfy all creditors through the tied creditors in priority position #4, and “Bidder C” bid $3.5 billion ($1.85 billion in cash, $1.65 billion in non-cash consideration).

The following day, a Saturday, Gold Reserve filed a letter for emergency relief objecting to the fact that the Transaction Support Agreement with the details of Red Tree's settlement with the 2020 bondholders wasn’t public. Vitol Inc.—a third Stalking Horse bidder—joined Gold Reserve’s argument, and on March 26, 2025 the court ordered the Special Master to file the Transaction Support Agreement on the public docket, which he did on March 27.

Now the Topping Period begins, as everyone continues to move towards a sale date currently set for July. Not every creditor will make it there, however—both Lovati and Altana have formally withdrawn as Additional Judgment Creditors. And on March 31, Venezuela filed a motion for a stay seeking to push the sale date to October, but the court denied it on April 1.  

We will continue to provide updates on this important case.

¹ Capitalized terms such as "Topping Period" and "Additional Judgment Creditor" refer to the defined terms in the Crystallex Sale Procedure Order. "PDVSA" stands for Petróleos de Venezuela S.A., which is the parent company of PDV Holding, Inc. (PDVH), which is the parent company of Citgo Holding, Inc., which is the parent company of Citgo Petroleum Corporation.